Maureen Ohlhausen, a commissioner of the Federal Trade Commission, has called for regulatory humility, but what does that mean in practice for issues such as online privacy, the Internet of Things, and net neutrality regulation? During this AEI event, Ohlhausen will outline a step-by-step approach for putting the principles of regulatory humility into action and will identify high and low watermarks for the commission’s adherence to this approach.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

The production of social and economic statistics is among the most important and useful functions of government. Because the production of official statistics has long been considered a public good, it has been inconceivable that any organization other than government could produce the reliable and accurate information necessary for business decisions and public policy design — until now.

Big Data is one of the most discussed innovations of the 21st century, but can it replace the federal statistical system? If not, can official statistics and Big Data complement each other? A panel of leading experts will discuss these questions and more.

Lunch will be served.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

1. Chart of the Day I – the Global Stock Market Rally. The Morgan Stanley Capital International world stock market index is up by 7.3% over the last year, and has been hovering in record-high territory over the last week. As I reported last week on CD, world trade and world industrial production both ended last year at record high levels in December. The record high for the MSCI world stock market index provides additional evidence that the global economy and equity markets continue to show ongoing signs of improvement.

2. Chart of the Day II. The US produced almost 32 trillion cubic feet of natural gas last year, according to data released last week by the Energy Information Administration, establishing a new all-time record volume of domestic natural gas output. Natural gas production in the US last year was especially noteworthy for several reasons: a) the nearly 2 trillion cubic feet increase from 2013 was the largest annual increase in America’s natural gas production in history and b) the 31.88 trillion cubic feet of US production last year was largest volume of annual natural gas production ever produced by a single country. All of these natural gas production milestones are the direct result of the shale gas revolution made possible by the revolutionary “Made in the USA” extraction technologies of hydraulic fracturing and horizontal drilling.

3. Interesting Fact: There are almost three times as many Chinese restaurants in America (41,000) as there are McDonald’s (14,350).

By analogy, let’s imagine that a retailer furniture company were in a position to offload all their shipping costs to the trucking industry. By government decree, the truckers were not permitted to charge any more or less whether they were shipping one chair or a whole houseful of furniture. Would the furniture sellers favor such a deal? Absolutely. They could call this “furniture neutrality” and fob it off on the public as preventing control of furniture by the shipping industry.

8. San Francisco Bookstore Update. About a month ago, I posted about how Borderlands Books in San Francisco was able to survive a 100% rent increase, the effects of the Great Recession, and competition from Amazon, ebooks and electronic reading devices. But it looked like it wouldn’t be able to survive a 39% increase in its labor costs because of the voters of San Francisco passed an increase in the city’s minimum wage lawgovernment-mandated wage floor that guarantees bookstores and other small businesses in the city will be forced to close down. Well, the bookstore has been given a temporary, one-year reprieve, thanks to 300 customers who each bought a $100 one-year sponsorship to raise $30,000. Those funds will help pay for the bookstore’s higher labor costs and will allow it to stay open until March 2016, when another round of fundraising will be necessary.

As CD regular Charles Platt writes by email:

The regulatory environment of San Francisco has transformed a for-profit business into a kind of charitable endeavor, dependent on donations [like National Public Radio]. I doubt this is a viable long-term model.

9. Cell Phone Justice, via Radley Balko. But for the video…. The latest example of a cellphone video vindicating someone from false charges is a doozy.

10. CEO vs. Average Worker Pay. Jeffrey Dorfman writing in Forbes finds that “When we compare average worker pay to the average pay for all CEOs, the much hyped story reverses—workers have actually seen their pay rise slightly faster than the CEOs have.”

]]>http://www.aei.org/publication/tuesday-evening-links-16/feed/05 questions every presidential candidate should answer: Japan editionhttp://www.aei.org/publication/5-questions-every-presidential-candidate-asked-japan-edition/ http://www.aei.org/publication/5-questions-every-presidential-candidate-asked-japan-edition/#commentsTue, 03 Mar 2015 21:18:51 +0000http://www.aei.org/?post_type=publication&p=834179While Asia seems largely peaceful compared to Eastern Europe and the Middle East, it is, in fact, a region of growing risk. The balance of power in the region appears to be shifting towards China, while America’s alliances remain in need of upgrading to focus on new threats. North Korea’s missile and nuclear program continues apace, and Sino-Russian relations grow ever closer on issues ranging from energy to diplomacy. Demographic changes and economic slowdown also plague every nation in the region.

In order for the United States to successfully maintain its presence and influence, as well as to mitigate growing risk, working with its allies is more important than ever. At the top of that list is Japan, Asia’s most powerful democracy. Yet Japan continues to struggle with economic reform and is attempting to forge closer relations with its Asian neighbors. Given Japan’s importance to Asia’s future path, the following are some of the top questions every presidential candidate should be asked.

1. Do you support a quick conclusion of the Trans-Pacific Partnership free trade talks?

Japan’s economy has languished for over 20 years, yet current Prime Minister Shinzo Abe (pronounced “ah-bay”) is shaking things up with his economic reform plan, colloquially known as “Abenomics.” A cornerstone of his reform approach is to conclude a free trade agreement with the United States and other Pacific partners. Yet the TPP, as it is known, has proved difficult to conclude, particularly due to American opposition to Japanese autos and Japanese intransigence on agricultural issues. President Obama, however, has put little personal effort into pushing the TPP, taking away some of the momentum behind it. A new president will have to lean in on free trade, not least because it will help Japan return to economic vitality.

2. How will you protect Japan from North Korea’s nuclear and missile program?

For over 20 years, America has failed to prevent North Korea from developing a nuclear capability as well as a ballistic missile program. Japan’s military modernization can in many ways be dated back to 1998, when Pyongyang launched a ballistic missile over the Japanese homeland. As North Korea becomes a de facto nuclear power, how will Washington assure Tokyo that extended deterrence is still credible? If Tokyo begins to doubt that its ultimate safety can be assured by the United States, then talk of an independent nuclear program will become more likely, leading to further strain between Japan and its allies.

3. What will you do to try and improve Japan-South Korean relations?

Although 2015 marks the 50th anniversary of the normalization of relations between Japan and South Korea after World War II, ties between Tokyo and Seoul are at their lowest perhaps since 1965. Given that Japan and South Korea are America’s two closest Asian allies, and that any US intervention on the Korean peninsula in the case of a crisis would likely entail support from Japan, the parlous state of affairs between them hinders US alliance planning with both countries. While an improvement in Japan-South Korea ties ultimately must come from the countries themselves, an American president has enormous influence to wield to improve relations. With South Korea drifting towards China in recent years, Japan will feel increasingly isolated in Northeast Asia, unless it can improve ties with its neighbor democracy.

4. How will you ensure that US military capacity in Asia remains sufficient to protect Japan under the terms of the US-Japan alliance?

Japan’s great concern over the next generation is the growth of China’s military strength, combined with a more assertive, if not aggressive attitude. Relations between the two are as frosty as those with South Korea, and the ongoing dispute over the Senkaku Islands continues to contain the potential for miscalculation or accident that could result in a military clash, likely drawing America in, due to alliance commitments. The so-called Obama “pivot” to Asia, while commendable in theory, remains at risk being underfunded and overtaken by events elsewhere. Given the continued threat of sequestration, the aging of America’s military equipment, and the need to deal with crises in the Middle East and Europe, a credible plan to ensure American military dominance in Asia will be central to ensuring that Japan remains a steadfast ally, confident of our ability to maintain stability.

5. How will you work with Japan to promote and develop liberal norms in Asia?

Japan remains Asia’s oldest and most stable democracy, despite economic stagnation and political paralysis in the last decade. It is a model for many Asian nations who envy its level of development, social stability, rule of law, standard of living, and the like. It is not a perfect model, but it offers an alternative to China’s authoritarian approach, and is especially appealing to many Asian nations that either have liberalized or are attempting to do so. Working together more explicitly, America could partner with Japan to help spread and encourage liberal trends in civil society and regional cooperation, thereby further creating a liberal community of interests in Asia.

]]>http://www.aei.org/publication/5-questions-every-presidential-candidate-asked-japan-edition/feed/0Capital taxation in the 21st century: A critique of Pikettyhttp://www.aei.org/publication/capital-taxation-21st-century-critique-piketty/ http://www.aei.org/publication/capital-taxation-21st-century-critique-piketty/#commentsTue, 03 Mar 2015 20:11:13 +0000http://www.aei.org/?post_type=publication&p=834167In Capital in the Twenty-First Century (Piketty 2014) Thomas Piketty presents a compelling story of the ascendency of capital and the powerlessness of the market forces to arrest the growing threat to democracy from growing wealth – and its increasing concentration in the hands of the few. Piketty prescribes a global, coordinated wealth tax as the antidote to this dystopian trend, arguing that only such a direct assault on wealth concentration will succeed where the other policies of governments – that already play large roles – in their respective economies have failed.

We take issue with Piketty’s facts, logic, and policy conclusions. The support for the view that there will be an inevitable rise in capital’s share is lacking. In addition, even if the world were as Piketty describes, a wealth tax finds little or no support either in Piketty’s own work or elsewhere in the literature.

A note on data and data sources A number of authors have raised question concerning the data analysis that underpins Piketty’s dystopian view. We illustrate these concerns with an in-depth investigation of recent US data. As discussed in our paper (Auerbach and Hassett 2015) – and as is evident from the comparison in Figure 1 – in translating data from other sources on US wealth concentration, Piketty manipulates the timing of observations in a manner that overstates the strength and smoothness of the recent upward trend, and obscures a downtrend present in his source data at the end of the sample period.1

Figure 1. Share of wealth, top 1%

Figure 1. Share of wealth, top 1%

r vs. g In Capital, the relationship between the return to capital r and the economic growth rate g is presented as a fundamental relationship determining our economic path. The basic syllogism is

r exceeds g,

saving generated by this high rate of return causes capital and wealth to grow faster than the economy, and

capital income grows as a share of income because the rate of return does not fall sufficiently fast with capital deepening.

But how should one measure r? Absent fundamental risk or capital taxation, all rates of return should be equal. But with market risk and risk-aversion, the expected return will include a risk premium, so that markets will outperform safe investments on average but will do worse in bad states of nature where resources are particularly highly valued. Thus excluding returns in bad states is certainly not the way to measure r, and even including all returns misses the point that one shouldn’t weigh good and bad outcomes equally.

Further, the rate of return to investors relevant to Piketty’s comparisons to the rate of economic growth is the after-tax return. Capital income taxed away by the government does not accumulate in the hands of the few.

Piketty’s time series on after-tax rates of return faces two shortcomings.

First, the tax rates used to calculate the after-tax returns on capital in Piketty and Zucman (2014) are average tax rates. But given the book’s focus on the share of wealth held by the top 1% and even the top 0.1%, the relevant tax policy parameter seems to be the top marginal tax rate rather than the average tax rate.

Second, Piketty calculates the return on capital based on national accounts data and does not adjust for risk.

These decisions are crucial to the analysis.

In our paper, we construct an alternative time-series on the after-tax rates of return in the US that takes into account these two criticisms. To derive the after-tax rate of return from the pre-tax rate of return, we simulated using NBER’s TAXSIM the increase in tax liability that would result from an increase of 1% in the interest income accruing to the top 1% of income earners in each year, and then calculated the effective tax rate that would be paid on the average dollar of that additional income. To proxy for the risk-free pre-tax rate of return on capital, we use historical time-series data on ten-year treasury bond yields.

Figure 2 graphs both this alternative series and the series on pre- and post-tax returns on capital from Piketty and Zucman (2014). As one can see, the pre-tax rate of return using the alternative specification is substantially lower than the national accounts based series from Piketty and Zucman (2014). Likewise, the post-tax rate of return using the top marginal tax rate is substantially lower than their post-tax rate. Indeed, the alternative post-tax rate of return remains consistently lower than GNP growth. From this perspective, the apocalyptic r > g ‘exploding wealth inequality’ scenario does not look especially likely.

Figure 2. Four Different Computations of “r”

Figure 2. Four Different Computations of “r”

Global wealth taxation and its alternatives Piketty (pp. 528-530) argues passionately for a substantial annual wealth tax, with a progressive rate structure with marginal tax rates of two, five, or even 10% on the highest wealth levels. Putting forward such a proposal is truly a bold step, taking place as it does against a backdrop of intense international tax competition. It is a bold step, also, in terms of the logical support one can find for it elsewhere in the book or in the substantial literature on the design of optimal tax systems. Indeed, Piketty turns a key insight from this literature on its head.

An important development in the literature on taxation and saving is a fuller understanding of the relationships between different tax bases – in particular consumption taxes, labour income taxes, and capital income taxes. While simple models may equate taxes on labour and consumption, a major difference is the ability of consumption taxes to hit existing sources of wealth, attributable to rents, inheritances, disguised labour income, etc. This broader consumption tax base can provide a tax system that is more efficient (Auerbach and Kotlikoff 1987), and – with a progressive rate structure – a reasonably progressive distribution of the lifetime tax burden (Altig et al. 2001). As is now also well understood, a consumption tax differs from a capital income tax in its treatment of capital income only by its exemption of the safe rate of return on investment. Thus, consumption taxes hit wealth without interfering with the incentive to save associated with the intertemporal terms of trade. Wealth taxes, on the other hand, effectively tax the safe rate of return on investment because they do not depend on actual rates of return, thereby incurring the intertemporal distortion but forgoing tax on other components of the rate of return. Thus, consumption taxes reduce the value of wealth – just as wealth taxes do – so we see no basis to argue that wealth taxes have a greater capacity to limit the power that wealth provides.

A distinct question is how certain expenditures – for example political campaign contributions – should be taxed. But this question actually highlights a further potential advantage of a consumption tax relative to a wealth tax. A wealth tax reduces the purchasing power of wealth that is spent currently by the same amount, regardless of how the funds are used. Under a consumption tax, an additional level of tax could be added by defining political contributions to be consumption, so that both the act of contributing and the expenditures of contributed funds would be taxed. Thus, a consumption tax is potentially a more powerful tool. In summary, tax policy can play an important role in addressing inequality, but we find little support for Piketty’s proposal, either in his own work or elsewhere in the literature.

Piketty’s book rests on three pillars:

the idea that there is a steady and inexorable upward trend in the share of wealth going to those at the top,

the idea that r>g induces a path wherein the wealthy gradually absorb all of economic output, and

Saez, E and G Zucman (2014), “Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Data,” NBER Working Paper No. 20625.

Footnotes

1 This is not to suggest that there is no evidence in favor of an increasing recent share of wealth at the top. For example, Saez and Zucman (2014) find an increasing share from estimates based on capitalizing flows of capital income. Such a trend is much less evident when one uses alternative approaches based on estate tax returns or survey evidence. The sources of these differences and a consideration of which approach might be most accurate are considered by Saez and Zucman (who favor the capitalized income method) as well as Kopczuk (2014) and Bricker et al. (2014), who argue in favor of the survey-based method of measurement.

]]>http://www.aei.org/publication/capital-taxation-21st-century-critique-piketty/feed/0King v. Burwell: 4 words and 8 million Americanshttp://www.aei.org/publication/king-v-burwell-4-words/ http://www.aei.org/publication/king-v-burwell-4-words/#commentsTue, 03 Mar 2015 19:36:11 +0000http://www.aei.org/?post_type=publication&p=834122...]]]>The impending oral argument in King v. Burwell has unleashed a flood of editorials, op-eds, and amicus briefs imploring the Supreme Court to uphold the Obama administration’s position in the case. They all rehearse the same sketchy arguments about the language and history of the Affordable Care Act (ACA). Constant repetition gives these arguments the patina of truth, but readers should not be fooled.

First, the case is not a challenge to the ACA. It challenges an IRS regulation interpreting the ACA to allow the payment of subsidies (tax credits) to purchase health insurance on health care exchanges established by both states and the federal government. The King plaintiffs claim that the ACA language limits subsidies to the 14 states that have established their own exchanges and does not allow them for the federal exchanges established for the remaining states. More than 8 million Americans have enrolled in the federal exchanges and 87 percent of enrollees are receiving subsidies. If the Supreme Court disallows their subsidies, most federal enrollees will be unable to afford their insurance. The subsidies are also important because receipt of subsidies triggers the ACA’s mandates — without the subsidies, there would be no employer mandates and virtually no individual mandates in the states using the federal exchange.

If the Supreme Court disallows their subsidies, most federal enrollees will be unable to afford their insurance.

Administration supporters argue that the plaintiffs are ignoring the whole text of the ACA and focusing on four words — “established by the State” — in isolation. But the disputed ACA section 1421 authorizes subsidies for enrollees “through an Exchange established by the State under section 1311” (emphasis added), the section that directs states to establish health exchanges. Federal exchanges are authorized for states that fail to establish an exchange under a different section, 1321, which is conspicuously absent from section 1421. The IRS rule would only make sense if section 1421 provided subsidies for exchanges established under section 1311 and 1321 or if it specified exchanges established by the state and federal governments. Congress could have easily inserted such language.

Opponents of the lawsuit claim no reputable legal scholar takes the plaintiffs’ legal arguments seriously (the New York Times called them “baloney”). Yet, in two of the three challenges to the IRS regulation decided thus far, federal courts have sided with the King plaintiffs. Only the Fourth Circuit in King v. Burwell has disagreed and the court conceded it was a close question because the statutory language is ambiguous.

Supporters of the Obama administration claim these interpretations are contrary to Congress’ intent, which was to create affordable care for all. If that were true, why did Congress limit subsidies to exchange enrollees? Why not allow subsidies regardless of where one buys health insurance?

In fact, as reported by Thomas Miller, my colleague at the American Enterprise Institute, Congress considered and discarded language that would have allowed subsidies on federal exchanges. The first Senate version of the ACA, the Affordable Health Choices Act (S.1679) by the Senate Health, Education, Labor, and Pensions Committee, explicitly allowed payment of subsidies on federal fallback exchanges. But this payment language did not survive into the final version of the ACA.

Congress considered and discarded language that would have allowed subsidies on federal exchanges.

The King plaintiffs argue that Congress specifically excluded subsidies from the federal exchanges to create an incentive for states to establish exchanges and make their citizens eligible for subsidies. Administration supporters claim that if Congress really intended to inform states that their citizens would only be eligible for subsidies on state-established exchanges, it would have made it more conspicuous and not “buried” the disputed language in an obscure section of the statute. But that section is no more buried than other ACA sections. It is the section that regulates eligibility and subsidy calculation. The “established by the State” language actually appears in multiple places in the ACA.

The fact is that more than two-thirds of states chose not to establish exchanges. Several have averred that they recognized setting up an exchange would obtain subsidies for their citizens but subject all of their businesses to the employer mandate and many of their citizens to the individual mandate. This suggests that they thought they would avoid subsidies and mandates by opting for the federal exchange. The IRS rule allowing federal exchange subsidies removed any incentive that states had to engage in the difficult and expensive task of establishing exchanges.

When the Supreme Court decides King v. Burwell, it should consider the actual language Congress enacted, not the language that editorial writers and law professors wish they had.

Joel Zinberg, M.D., J.D., F.A.C.S., a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine.

]]>http://www.aei.org/publication/king-v-burwell-4-words/feed/4Obama’s biggest problem is not Netanyahuhttp://www.aei.org/publication/obamas-biggest-problem-netanyahu/ http://www.aei.org/publication/obamas-biggest-problem-netanyahu/#commentsTue, 03 Mar 2015 19:24:20 +0000http://www.aei.org/?post_type=publication&p=834147What an odd sight — the Prime Minister of the state of Israel striding into the House chamber to address a joint meeting of Congress for all the world looking more popular than the president of the United States. Not a page from the Protocols of the Elders of Zion, but rather the fine PR work of a White House that ought to know better.

Perhaps House Speaker John Boehner should not have invited Benjamin Netanyahu to speak. Perhaps Netanyahu should have declined. But in the face of those two realities, the White House, far from ignoring the event, went berserk. Sunday shows. AIPAC. Interviews with the president. Protests. Background sniping. In so doing, they only demeaned themselves and blew L’Affaire Bibi into the spotlight.

And what of the speech itself? It was finely executed, a litany of Iran’s depredations, and a clear explanation of the perils of a deal that, to paraphrase Netanyahu, paves the way to an Iranian nuclear weapon.

Ironically, the terms of the deal are ones that even Obama would once have opposed: Keeping uranium enrichment capacity; keeping a heavy water reactor; writing off military dimensions of the program; a 10- to 15-year sunset. … But now the White House insists that this deal is the only way to avoid war.

Obama’s biggest problem is not Israel’s Prime Minister — it is his own willingness to concede every point to skilled Iranian negotiators. In seeking to defend Iran from criticism, and desperately trying to close a flawed deal, the president has been at the heart of all the problems with Congress, the Gulf and Israel. All Netanyahu did was notice.

]]>http://www.aei.org/publication/obamas-biggest-problem-netanyahu/feed/0Robertson CPAC speech has merithttp://www.aei.org/publication/goldberg-robertson-cpac-speech-merit/ http://www.aei.org/publication/goldberg-robertson-cpac-speech-merit/#commentsTue, 03 Mar 2015 19:13:46 +0000http://www.aei.org/?post_type=publication&p=834136Phil Robertson, the patriarch of the Duck Dynasty family franchise, gave a stem-winder of a speech at the Conservative Political Action Conference last Friday.

It was an odd spectacle, as he fished around in his kit bag while telling the audience to make sure you carry around “your Bible and your woman.” He then produced his Good Book, wrapped in duct tape (but, fortunately, not his woman similarly attired).

The most remarkable part of his talk was his long discourse on sexually transmitted diseases which, prior to his address, had not been high on the CPAC agenda. Citing the Centers for Disease Control and Prevention, Robertson lamented that 110 million Americans have an STD. “It’s the revenge of the hippies! Sex, drugs and rock and roll have come back to haunt us, in a bad way.” Among his advice, find a disease-free spouse and don’t stray.

Lots of people rolled their eyes at this. But I’m not exactly sure why. Surely no one thinks it’s a good thing that a third of Americans have a sexually transmitted disease.

Hippies still to blame?

Sure, blaming the hippies for today’s ills is a bit of cliché, but it’s not like he doesn’t have a point. I was reminded of one of my favorite essays: “The Great Relearning” by Tom Wolfe. He recounts the story of how doctors working at the Haight-Ashbury Free Clinic in 1968 had encountered maladies “no living doctor had ever encountered before, diseases that had disappeared so long ago they had never even picked up Latin names.” These afflictions — not all of them STDs — had such street names as the mange, the grunge, the itch, the twitch, the thrush and the rot.

What happened? Well, the hippy communards of the Summer of Love didn’t want to play by The Man’s rules anymore. Like Rousseau’s noble savages, they wanted to let their freak-flags fly. “Among the codes and restraints that people in the communes swept aside — quite purposely — were those that said you shouldn’t use other people’s toothbrushes or sleep on other people’s mattresses without changing the sheets or, as was more likely, without using any sheets at all, or that you and five other people shouldn’t drink from the same bottle of Shasta or take tokes from the same cigarette,” wrote Wolfe. “And now, in 1968, they were relearning … the laws of hygiene … by getting the mange, the grunge, the itch, the twitch, the thrush, the scroff, the rot.”

Some facts of life

One can surely make too much of such things, but there’s a clear and important lesson nonetheless. We don’t always know why certain rules and customs have survived so many generations, but that doesn’t mean they serve no purpose. This is the morale of G.K. Chesterton’s parable of the fence. The modern reformer sees a fence in a field and says, “I don’t see the use of this; let us clear it away.” The more intelligent reformer will say in response, “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

There’s a natural human tendency to take our good fortune for granted and mistake vast human progress as the natural order of things. The reality, alas, is that reality always intrudes. And when it does, relearnings — great and small — are required. This tendency predates the hippies by millennia, so how much blame can be placed specifically at their sandaled feet for STD rates is an open question. But consider other diseases? The media coverage of the California measles outbreak has died down, but the problem endures (and not just in California) because people take vaccinations for granted.

It’s a lesson with parallels everywhere, from international terrorism, to big city crime. The facts of life can be cruel tutors for those in need of relearning old lessons. There’s no law that says you must follow Robertson’s advice, but the one thing you can say in favor of the old and tried over the new and untried: We know it works.

]]>http://www.aei.org/publication/goldberg-robertson-cpac-speech-merit/feed/0Obama’s Keystone XL pipeline vetohttp://www.aei.org/publication/obamas-keystone-xl-pipeline-veto/ http://www.aei.org/publication/obamas-keystone-xl-pipeline-veto/#commentsTue, 03 Mar 2015 18:50:42 +0000http://www.aei.org/?post_type=publication&p=834128Experienced vote counters do not believe that either the House or the Senate will muster the two-thirds majority necessary to override President Obama’s veto of the Keystone XL pipeline bill. If so, Mr. Obama’s years of delay and disingenuousness on this issue, culminating in his veto, will guarantee negative consequences for America long into the future.

Keystone is a textbook example of the integral relationship between foreign and domestic affairs. The pipeline’s economic benefits are evident, including facilitating increased supplies of North American oil; helping integrate U.S. and Canadian hydrocarbon infrastructures; and providing energy without international political risk.

But blocking Keystone is not merely bad domestic policy. Equally unfortunate, and perhaps worse, are the negative implications for America internationally.

Mr. Obama’s veto thus provides a leadership test for prospective presidential candidates. In particular, the Keystone XL controversy highlights Hillary Rodham Clinton’s acute political dilemma over whether and how to separate herself from her own record as Mr. Obama’s first secretary of state. She has a lot to answer for, and she will have to state her position on his veto, if not now, then certainly when she becomes a declared presidential candidate. Will she support the veto, or will she finally find a major issue on which to distance herself from her former boss?

Mrs. Clinton’s record on Keystone as secretary was ambiguous. State had a responsibility to evaluate whether the proposed pipeline, which would cross the U.S.-Canadian border, was in the national interest. In 2010, speaking in California, Mrs. Clinton responded to a question about the pipeline this way:

“So as I say, we’ve not yet signed off on it. But we are inclined to do so and we are for several reasons . We’re either going to be dependent on dirty oil from the Gulf or dirty oil from Canada.”

She went on to bemoan congressional failure to pass Obama administration environmental and “clean energy” proposals, but her self-professed “inclination” favoring the pipeline was clear.

Subsequently, however, in 2012, Mrs. Clinton supported Mr. Obama’s objection to proposed legislation requiring the president to make a decision on Keystone XL within 60 days. In a carefully worded statement, the State Department did not object on the merits, but merely argued it hadn’t had enough time to complete its “national interest” review. Mr. Obama continued dodging a decision for three more years, until last week’s veto of a new legislative effort to force his hand.

Mr. Obama’s ideological intransigence on Keystone XL has already harmed our relationship with Canada. That takes work, but Mr. Obama succeeded both because of his policy objections to Keystone and because of his flip and gratuitous mishandling of Canada. For starters, Mr. Obama chastised Prime Minister Stephen Harper’s government for weakening Canada’s environmental laws involving tar sands (which would produce a substantial part of the pipeline’s flow-through). Mr. Obama doubtless also opposes Mr. Harper withdrawing Canada from the Kyoto Protocol.

Mr. Obama then complained about the number of Canadian jobs Keystone would create, as if new jobs there reduce new jobs here. Obviously, the Canadian and U.S. economies are inextricably intertwined, to the enormous benefit of both. Mr. Obama complained further that only Canadian oil would be shipped through the pipeline, and it would all be sent overseas rather than used in the United States. Both these points are wrong. Oil from our own Bakken shale formation would be an important element of the pipeline’s business, and significant amounts could be refined and sold here.

Across both the Atlantic and the Pacific Oceans, key U.S. allies are eager for U.S. energy production and technology to help free them from dependence on politically chancier sources of oil and natural gas. Europe, finally awakened by the Ukraine crisis, urgently wants to reduce its dependence on Russian hydrocarbons. North American oil and gas would provide an alternative source not only to help keep prices down, but also to provide a strategic alternative.

Similarly, Japan, South Korea and Taiwan would welcome alternatives to Middle Eastern oil, itself inherently risky politically, but also increasingly endangered by Beijing’s efforts to turn the South and East China Seas into Chinese territorial waters. Moreover, North American energy could also be sold directly to China, thereby helping mitigate the balance-of-payments deficits that have provided Beijing with enormous dollar assets in recent decades.

Given the undeniable deniable economic and international strategic benefits of increased North American oil and natural gas production, exemplified by Keystone XL, this issue will unquestionably loom large in 2016’s presidential campaigns. U.S. public opinion polls have repeatedly shown majorities supporting the pipeline, despite opposition from powerful, well-funded environmental groups.

And there, of course, lies Mrs. Clinton’s dilemma. This is only one of many, but her ultimate Keystone XL position is also directly tied to her performance as secretary of state, the one resume item that she is relying upon to qualify for the presidency. This is an issue to watch.

]]>http://www.aei.org/publication/obamas-keystone-xl-pipeline-veto/feed/1Analyzing Netanyahu’s speech to Congress: Pletka on Fox News’ ‘Happening Now’http://www.aei.org/press/analyzing-netanyahus-speech-congress-pletka-fox-news-happening-now/ http://www.aei.org/press/analyzing-netanyahus-speech-congress-pletka-fox-news-happening-now/#commentsTue, 03 Mar 2015 18:25:47 +0000http://www.aei.org/?post_type=press&p=834138http://www.aei.org/press/analyzing-netanyahus-speech-congress-pletka-fox-news-happening-now/feed/0Welfare reform and lessons from the United Kingdom: A conversation with UK Secretary of State for Work and Pensions Iain Duncan Smithhttp://www.aei.org/events/welfare-reform-lessons-united-kingdom-conversation-uk-secretary-state-work-pensions-iain-duncan-smith/ http://www.aei.org/events/welfare-reform-lessons-united-kingdom-conversation-uk-secretary-state-work-pensions-iain-duncan-smith/#commentsWed, 18 Feb 2015 00:32:54 +0000http://www.aei.org/?post_type=event&p=831870...]]]>The United Kingdom is currently undertaking the most ambitious overhaul of its welfare system in 60 years — most significantly, the development and rollout of Universal Credit, a new benefit system designed for the 21st century.

We welcome you to join us at AEI as UK Secretary of State for Work and Pensions Iain Duncan Smith, Representative Todd Young (R-IN), and a panel of experts discuss the rationale and impetus for these reforms; the cultural changes — with respect to social return on public investment and reductions in dependency — that have been achieved; the challenges that the reforms face; and the program’s lessons for improving welfare policy in the United States.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

]]>http://www.aei.org/events/welfare-reform-lessons-united-kingdom-conversation-uk-secretary-state-work-pensions-iain-duncan-smith/feed/0The Misery Index is at a 56-year low. It needs to be replacedhttp://www.aei.org/publication/misery-index-56-year-low-needs-replaced/ http://www.aei.org/publication/misery-index-56-year-low-needs-replaced/#commentsTue, 03 Mar 2015 16:57:22 +0000http://www.aei.org/?post_type=publication&p=834080If you judge the US economy according to the 1970s-created Misery Index, times are pretty good. Inflation is low (thanks in part to low gas prices), unemployment is down (the Not-So-Great Recovery continues), therefore the Misery Index suggests an economy brimming with joy and contentment. And some other measures confirm that take. As the WSJ’s Josh Zumbrun notes in his piece on the index: “Economists may have caveats about the Misery Index; but consumers have fewer hang-ups. The Conference Board’s measure of Consumer Confidence and the University of Michigan’s Consumer Sentiment index in January reached the highest since 2007 and 2004, respectively.”

A few points here:

First, among those caveats that Zumbrun mentions is that the official jobless rate may be giving a misleading picture of labor market health. While the 5.7% U-3 rate is just 1.3 percentage points above its prerecession low, the broader U-6 unemployment-underemployment rate is 3.4 points above its prerecession nadir. What’s more, the employment rate — the share of nonjailed, nonmilitary adults with any job — is still way closer to its recession low than its prerecession high. And while job creation is up, wage growth has been pretty stagnant.

Second, cheaper gasoline has brought down the inflation rate. Great. But prices weren’t rising very fast even before the oil price plunge, and that was probably a holdover of the Great Recession’s adverse shock to demand. Low inflation isn’t always a good thing.

Third, while consumer confidence numbers are up, the higher savings rate may suggest a lack of confidence in the recovery. More from the WSJ: “Americans are taking the money they are saving at the gas pump and socking it away, a sign of consumers’ persistent caution even when presented with an unexpected windfall.” That attitude seems more in line with this gloomy chart:

Fourth, so what might a new-and-improved Misery Index be and show? Well, how about combining the 11.3% U-6 rate with about a 3% college tuition inflation rate, of great concern to many American families. That would give us a 14.3% New Misery Index, comparable to what we saw in the 1970s. Yes, I know it’s not perfectly comparable, but that may give a better rough sense of modern American economic well being than that of the old Misery Index

]]>http://www.aei.org/publication/misery-index-56-year-low-needs-replaced/feed/0If only 12% of campus sexual assaults are reported, then 1 in 38 women at the Univ. of Minnesota are sexually assaulted, not 1 in 5http://www.aei.org/publication/12-campus-sexual-assaults-reported-1-38-women-univ-minnesota-sexually-assaulted-1-5/ http://www.aei.org/publication/12-campus-sexual-assaults-reported-1-38-women-univ-minnesota-sexually-assaulted-1-5/#commentsTue, 03 Mar 2015 16:29:00 +0000http://www.aei.org/?post_type=publication&p=834081...]]]>

In a January 2014 report titled “Rape and Sexual Assault: A Renewed Call to Action” (which led to the creation of the “Task Force to Protect Students from Sexual Assault” headed by Vice-President Joe Biden), the White House made the following two claims:

White House Claim 1. Sexual assault is a particular problem on college campuses: 1 in 5 women has been sexually assaulted while in college (pages 1, 2, 10, 14).

White House Claim 2. Reporting rates for campus sexual assault are also very low: on average only 12% of student victims report the assault to law enforcement (page 14).

I’ve reported previously on CD many times that there’s a huge, irreconcilable problem here. If the second claim about under-reporting of campus sexual assault is even close to being accurate, it means that nowhere near 1 in 5 women are sexually assaulted while in college. As I reported in January 2014 on CD:

The problem is that the two sets of numbers the White House uses don’t work together. If you look at virtually any university in America and take the number of reported sexual assaults, and use that number in conjunction with the White House’s 12% reporting percentage claim, you don’t get one-in-five. Nowhere near. Do the math yourself.

I’ve done the math using: a) the actual number of reported sexual assaults for several major college campuses and b) the White House reporting percentage claim of only 12%, for the University of Florida, Ohio State University, the University of Texas-Austin, Michigan State University, the University of Wisconsin, the University of Michigan, and UC-Berkeley, and found that the estimated number of college women who are sexually assaulted while in college is between 1 in 20 and 1 in 79. That’s still too high, but nowhere near 1 in 5.

Let’s do some more math using actual crime statistics from the University of Minnesota-Twin Cities for the four years from 2010-2013 (data are available here for 2010-2012 and here for 2013, and those data are summarized in the Table 1 above) and the White House’s reporting assumption of 12%. Over the most recent four-year period, there were 82 reports of “forcible sex offenses” on the University of Minnesota main campus, in university residence halls, on nearby non-campus property, and on public property adjacent to campus. We’ll assume that 100% of the sexual assaults victims were female and 100% of the offenders were male. Using the White House claim that only 12% of campus sexual assaults get reported, there would have been 601 unreported sexual assaults at UM during that period, bringing the total number of sexual assaults (reported + unreported) to 683 (see Table 1 above).

The University of Minnesota main campus has a total student population of 50,500, and about 26,000 of those students are female. Dividing the 683 estimated sexual assaults over the most recent four-year period into the 26,000 Minnesota female students would mean that only 2.6% of University Minnesota women, or about 1 in 38, would be sexually assaulted while in college. Certainly that’s still too high, but not even close to the White House claim that one in five (and 20% of) female students are sexually assaulted while in college.

Bottom Line: Team Obama asked for a “renewed call to action” in its January report on rape and sexual assault. Just as important, I think we need a “renewed call” for the White House to stop spreading wildly exaggerated claims about important issues like campus sexual assault. From a political standpoint, using the totally implausible statistic that “1 in 5 women” are sexually assaulted while in college certainly gets a lot of attention (and votes). The “1 in 38” statistic found at the University of Minnesota (or the “1 in 79″ previously reported for the University of Florida, or the “1 in 34″ statistic previously reported for Ohio State and used by George Will in his infamous column on campus sexual assault on), though not as attention-grabbing as “1 in 5,” are probably pretty representative of college campuses around the country and much closer to the truth than what the White House is claiming. Women attending college today, their parents, and society in general, are all much better served by the truth about college sexual assault than by Team Obama’s misleading, exaggerated, and false claims about “1 in 5 women will be sexually assaulted while in college.”

Another Reality Check: For the “1 in 5″ claim to be correct for the 26,000 female students at the University of Minnesota, there would have to be about 1,306 campus sexual assaults every year and 5,223 over a four-year period, instead of the 683 estimate above (see Table 2 above). That would mean that if there were only 82 campus sexual assaults actually reported to the UM campus police from 2009-2012, there would have been 5,141 unreported sexual assaults, which implies a miniscule and unbelievable reporting rate of only 1.57% (and a 98.43% non-reporting rate for campus sexual assaults). We would also have to then conclude that there are 3.5 campus sexual assaults at the University of Minnesota every day of the year, or about one every 7 hours! If UM really was such a crime-infested campus with sexual assaults taking place every seven hours, and with a violent crime rate worse than the most crime-ridden neighborhoods of cities like Detroit and North Minneapolis, why would any sane parent even consider sending their daughter to UM?

So we are again brought to the inevitable conclusion that the White House claim of “1 in 5″ is way, way too high, or the sexual assault reporting claim of 12% is way, way too high. Either way, one or both of the claims made by the White House about campus sexual assault are false, and inconsistent with the actual crime data at campuses like the University of Minnesota. Women and men attending college today, their parents, their college administrators and professors, and society in general, are all much better served by the truth about college sexual assault than by Team Obama’s misleading, exaggerated, and false claims about “1 in 5 women will be sexually assaulted while in college.”